Small Business Tax Credits You Could Qualify for in 2026
Most small business owners understand that they're subject to several ongoing tax obligations, but not as many take every opportunity to reduce their liability. Small business tax credits are one of the most overlooked ways to do that, and many owners and entrepreneurs miss out simply because they don't know which credits apply.
This guide breaks down federal tax credits available to small businesses in 2026, including significant legislative changes, and explains how to claim those that apply to your operations.
Key Highlights
Tax credits reduce your tax bill dollar for dollar, while deductions only reduce your taxable income.
The Work Opportunity Tax Credit can be worth $2,400 to $9,600 per qualifying employee hired from a targeted group.
The One Big Beautiful Bill Act (OBBBA) increased the employer-provided childcare credit to 40% of costs (50% for eligible small businesses), starting in 2026.
The Employee Retention Credit (ERC) is closed to new claims; existing claims are now handled through IRS review, audit, and appeals.
Most business tax credits must be reported on IRS Form 3800, General Business Credit, in addition to the specific form for each credit.
Eligibility for most credits depends on factors like employee count, wages paid, and business location.
What Are Small Business Tax Credits?
A tax credit reduces your annual tax burden dollar for dollar, while a tax deduction lowers your taxable income. Tax credits are applied to the tax owed by your small business when your tax return is filed. They cannot be used to reduce your taxable income. Some credits your business might be eligible for are common, while others are more obscure, but should still be claimed to reduce tax liability.
Small Business Tax Credits You Could Be Eligible For
Here are some of the most common tax credits your small business may be eligible for in 2026.
Credit | Form | What It Covers |
|---|---|---|
Work Opportunity Tax Credit | $2,400 to $9,600 per qualified new hire from a targeted group, such as veterans or long-term unemployed workers. | |
Small Business Health Care Tax Credit | Up to 50% of employee health insurance premiums for businesses with fewer than 25 full-time equivalent employees and average wages below the IRS threshold. Available for two consecutive years. | |
Research and Development Tax Credit | Credit for increasing research activities. Qualifying startups can apply up to $500,000 per year against payroll taxes instead of income tax. | |
Paid Family and Medical Leave Credit | Credit for wages paid to employees on family and medical leave under a qualifying written policy. | |
Employer-Provided Childcare Credit | 40% of qualified childcare facility and resource costs (50% for eligible small businesses), up to $500,000 ($600,000 for eligible small businesses), starting in 2026 under the OBBBA. | |
Retirement Plans Startup Costs Credit | Credit for costs of starting a SEP, SIMPLE IRA, or qualified retirement plan for businesses with 100 or fewer employees. | |
Disabled Access Credit | 50% of eligible access expenditures above $250, for costs that make a business more accessible to individuals with disabilities. | |
New Markets Credit | Credit for qualified equity investments made in qualified community development entities serving low-income communities. |
This is not an exhaustive list of tax credits your small business may be eligible for, but many businesses claim all that apply. If you're unsure where to start, the tax advisory team at 1-800Accountant can help your business zero in on all eligible tax credits as your operations scale.
A Note on the ERC in 2026
The ERC was a refundable tax credit enacted by the CARES Act to incentivize employers to keep staff on the payroll during the COVID-19 pandemic.
The IRS closed nearly all non-examined ERC claims as of December 31, 2025, with roughly 20,000 still moving through the review, audit, or appeals process. If the IRS denies your claim, you have a strict two-year window to file a lawsuit or appeal the ruling. The IRS introduced Form 907, Agreement to Extend the Time to Bring Suit, to request more time.
Rather than filing a new claim, business owners with an existing or disputed ERC claim should work with a tax advisor to achieve the best resolution possible.
How the OBBBA Changed Small Business Credits for 2026
The OBBBA was signed into law on July 4, 2025, and several provisions took effect starting with the 2026 tax year, benefiting many small business owners.
The Employer-Provided Childcare Credit increased from 25% to 40% of qualified costs (50% for eligible small businesses), while the annual cap rose from $150,000 to $500,000 ($600,000 for eligible small businesses).
The Research and Development Tax Credit now allows some businesses to amend prior returns tied to research expensing changes. A tax advisor can evaluate whether this applies to your operations.
The OBBBA blocked refunds for third- and fourth-quarter 2021 ERC claims filed after January 31, 2024.
While not credits, 100% bonus depreciation and 20% Qualified Business Income deduction have been made permanent. These common tax deductions are worth incorporating into your 2026 tax planning initiatives.
Difference Between Tax Credits vs. Tax Deductions
Tax credits and tax deductions are sometimes used interchangeably, perhaps because both will help to minimize your income tax liability. But they aren't the same and are applied differently. A tax credit for your small business reduces the money you owe, while a tax deduction is applied to your taxable income.
You may legally take advantage of all the credits and deductions your small business is eligible for.
Eligibility For Small Business Tax Credits
There are eligibility thresholds that your business must meet to qualify for certain tax credits.
Factor | How It Affects Eligibility |
|---|---|
Business size | Many credits set a maximum employee count. For example, the Small Business Health Care Tax Credit requires fewer than 25 full-time equivalent employees. |
Wages paid | Some credits phase out above inflation-adjusted average wage thresholds, so a business paying above the limit may not qualify. |
Location | Credits tied to community development, disaster relief, or economic zones require the business or investment to be in a qualifying area. |
Business activity | Credits such as the R&D Tax Credit and the Employer-Provided Childcare Credit require specific qualifying activities or expenditures. |
Thresholds adjust annually for inflation, so it's important to confirm current-year figures with the IRS or your tax advisor before filing.
Claiming Small Business Tax Credits
You must file Form 3800 to claim the general business credits you're eligible for. An area on Form 3800 allows you to add together each business tax credit you've identified to show the total amount you will be taking. It also helps ensure you haven't exceeded any limits on the credits you can take.
Use the general business credit limitation formula to make sure you're not over the limit: net income tax plus alternative minimum tax, minus the greater of tentative minimum tax or 25% of regular tax liability above $25,000.
Your audit risk increases if you take an excessive or outsized amount of tax credits.
FAQs About Small Business Tax Credits
What is the difference between a tax credit and a tax deduction?
A tax deduction reduces your taxable income, meaning you pay taxes on a lower total amount. A tax credit directly lowers your actual tax bill, dollar-for-dollar. For example, a credit is much more valuable because a $1,000 credit provides you exactly $1,000 in tax savings. In contrast, a $1,000 small business tax deduction only saves you money based on your specific tax bracket.
Can my business claim more than one tax credit in the same year?
Yes, your business can claim multiple tax credits in a single year, such as combining the Work Opportunity Tax Credit and the Research and Development Tax Credit. However, the IRS generally does not allow you to use the same wages to qualify for more than one credit at a time. Each credit generally requires its own unique set of qualifying business expenses.
Is the ERC still available in 2026?
No, the ERC is no longer available for active claims in 2026 or future tax years, as the program ended for wages paid in 2021. You could only file a retroactive claim for past qualifying quarters, and by law, late claims for late-2021 periods filed after January 31, 2024, are disallowed. The IRS closed nearly all non-examined ERC claims at the end of 2025, with thousands still moving through the review, audit, or appeals process in 2026.
What is the Work Opportunity Tax Credit, and which employees qualify?
The Work Opportunity Tax Credit is an incentive the government gives employers for hiring individuals from specific groups that face barriers to employment. Qualifying employees include veterans, qualified ex-felons, recipients of public assistance, such as SNAP benefits, and long-term family assistance recipients. Employers must be certified by their State Workforce Agency to claim this credit.
How much can the Employer-Provided Childcare Credit save my business under the OBBBA?
Under the OBBBA, this business credit generally allows you to claim up to 40% of qualified child care facility expenses. The maximum credit you can save is capped at $500,000 per tax year, which is among the most significant tax-saving opportunities this tax season. This allows businesses to offset rising costs by building or funding a child care program for employees.
Do tax credit eligibility thresholds change every year?
Yes, many tax credit eligibility and phase-out thresholds change annually. The IRS updates these limits to keep up with inflation. We recommend checking with your tax advisor or conducting research on the IRS website for the current year's rules before filing.
Turning Tax Credits Into Real Savings
Identifying every eligible small business tax credit requires ongoing attention as rules change from year to year. If you don't have the time to track these changes or the confidence to select every legally available credit, expert support is a game-changer.
When you're ready for a partner who can identify every allowable credit and deduction, explore 1-800Accountant's year-round tax advisory service to see how dedicated support can reduce your business tax burden.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1‑800Accountant assumes no liability for actions taken in reliance upon the information contained herein.